True cost of a credit line.

A business line of credit costs two things: interest on what you actually draw, plus a commitment fee on what you don't. Unlike a term loan, you only pay interest on the outstanding balance. The commitment fee (typically 0.25-0.50% per year on the undrawn portion) is the price of having the capacity available when needed.

500k credit limit with 200k average drawn over 12 months at 8% interest = 16,000 interest on drawn portion. Unused 300k × 0.25% = 750 commitment fee. Total cost 16,750. Effective rate on used capital is 8.38%, slightly higher than headline interest because of the commitment fee.

LOC is expensive when left mostly unused. A 1M facility used at 20% average has effective rates 50-80% above the headline interest rate because the commitment fee dominates cost. If utilisation stays under 30% over time, term loans sized to expected need almost always beat LOC on total cost.

Run it with sensible defaults

Using credit limit of 500,000, avg balance drawn of 200,000, interest rate of 8%, unused fee of 0.25%, the calculation works out to 16,750.00. Nudge the inputs toward your own situation and the output recalculates instantly. The defaults are meant as a starting point, not a recommendation.

The levers in this calculation

The inputs — Credit Limit, Avg Balance Drawn, Interest Rate %, Unused Fee %, and Months Used — do not pull with equal force. Not every input has equal weight. Flip one at a time toward extreme values to feel which ones move the needle most for your situation.

How the math works

Interest = balance × monthly rate × months. Unused fee = (limit - balance) × unused % × months/12. Total = interest + unused fee. The working is transparent — you can verify every step yourself in the formula section below. No black box, no opaque "proprietary model".

What to do with a low result

A disappointing result is information, not a judgement. Pick the single input that dragged the figure down most and focus the next quarter on that one factor. Breadth-first improvement rarely works; depth-first on the worst input usually does.

What this doesn't capture

The score is a composite of the inputs you provide. Life context — job security, family obligations, health, housing — doesn't appear in the math but shapes the real picture. Use the number as a prompt, not a verdict.